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Labor Law – Loss of Trust and Confidence

The Supreme Court had the opportunity of reiterating some well-known guidelines pertaining to dismissal due to loss of trust and confidence in the very recent case of M+W ZANDER PHILIPPINES, INC. and ROLF WILTSCHEK, versus TRINIDAD M. ENRIQUEZ, (G.R. No. 169173) promulgated just last week, i.e., June 5, 2009. You can read the facts of the case HERE. The central guidelines on loss of confidence as enunciated in this case are as follows:

Article 282 (c) of the Labor Code allows an employer to terminate the services of an employee for loss of trust and confidence. [28] Certain guidelines must be observed for the employer to terminate an employee for loss of trust and confidence. We held in General Bank and Trust Company v. Court of Appeals,[29] viz.:

[L]oss of confidence should not be simulated. It should not be used as a subterfuge for causes which are improper, illegal, or unjustified. Loss of confidence may not be arbitrarily asserted in the face of overwhelming evidence to the contrary. It must be genuine, not a mere afterthought to justify earlier action taken in bad faith.[30]

The first requisite for dismissal on the ground of loss of trust and confidence is that the employee concerned must be one holding a position of trust and confidence.

There are two classes of positions of trust: managerial employees and fiduciary rank-and-file employees.

Managerial employees are defined as those vested with the powers or prerogatives to lay down management policies and to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees or effectively recommend such managerial actions.[31] They refer to those whose primary duty consists of the management of the establishment in which they are employed or of a department or a subdivision thereof, and to other officers or members of the managerial staff.[32] Officers and members of the managerial staff perform work directly related to management policies of their employer and customarily and regularly exercise discretion and independent judgment.[33]

The second class or fiduciary rank-and-file employees consist of cashiers, auditors, property custodians, etc., or those who, in the normal exercise of their functions, regularly handle significant amounts of money or property.[34] These employees, though rank-and-file, are routinely charged with the care and custody of the employer’s money or property, and are thus classified as occupying positions of trust and confidence.

The second requisite of terminating an employee for loss of trust and confidence is that there must be an act that would justify the loss of trust and confidence.[38] To be a valid cause for dismissal, the loss of confidence must be based on a willful breach of trust and founded on clearly established facts.[39]

Article 282 (c) of the Labor Code allows an employer to terminate the services of an employee for loss of trust and confidence. Certain guidelines must be observed for the employer to terminate an employee for loss of trust and confidence. We held in General Bank and Trust Company v. Court of Appeals, viz.:

[L]oss of confidence should not be simulated. It should not be used as a subterfuge for causes which are improper, illegal, or unjustified. Loss of confidence may not be arbitrarily asserted in the face of overwhelming evidence to the contrary. It must be genuine, not a mere afterthought to justify earlier action taken in bad faith.

The first requisite for dismissal on the ground of loss of trust and confidence is that the employee concerned must be one holding a position of trust and confidence.

There are two classes of positions of trust: managerial employees and fiduciary rank-and-file employees.

Managerial employees are defined as those vested with the powers or prerogatives to lay down management policies and to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees or effectively recommend such managerial actions. They refer to those whose primary duty consists of the management of the establishment in which they are employed or of a department or a subdivision thereof, and to other officers or members of the managerial staff. Officers and members of the managerial staff perform work directly related to management policies of their employer and customarily and regularly exercise discretion and independent judgment.

The second class or fiduciary rank-and-file employees consist of cashiers, auditors, property custodians, etc., or those who, in the normal exercise of their functions, regularly handle significant amounts of money or property. These employees, though rank-and-file, are routinely charged with the care and custody of the employer’s money or property, and are thus classified as occupying positions of trust and confidence….

The second requisite of terminating an employee for loss of trust and confidence is that there must be an act that would justify the loss of trust and confidence. To be a valid cause for dismissal, the loss of confidence must be based on a willful breach of trust and founded on clearly established facts.

The case also includes a discussion of when and when not to grant moral damages in labor cases, and when is a General Manager personally liable for an illegally dismissed employee’s labor claims. You can read the whole thing HERE.

2 thoughts on “Labor Law – Loss of Trust and Confidence”

Question po. A rank and file employee, an Auto Loan processor, Falsified/tampered/fabricated a photocopy of Community Tax Certificate (not original)and used it to Notarize a Bank document. The bank charged him of Loss of Trust and Confidence and he is being ask why he should not be terminated. Is this valid charges to the rank and file employee? What about the responsibility of his Supervisor?. Thank you.

The falsification/tampering/fabrication of the Community Tax Certificate (which certainly affected the bank documen) might be considered a crime under the Revised Penal Code, especially under Articles 171 and 172 thereof. If so, there might really be a just cause for termination under Article 282 of the Labor Code. The liability of the supervisor depends on the extent of his involvement in the falsification, etc.

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The matters contained in this blog are for your general information only. This blog is not intended to be a forum for obtaining legal advice on specific legal issues. If you need legal advice, kindly contact a lawyer who can provide the assistance that you may require.